Concurrent Proximate Cause

The Supreme Court has confirmed, in the recent judgment of Navigators v Atlasnavios that findings of concurrent proximate causes are still possible thereby reinforcing the importance of policy exclusions.

After a period of some uncertainty following the Cendor MOPU1 judgment in 2011, the UK Supreme Court has reaffirmed the established principle2 of insurance law that when a loss arises through a combination of two concurrent proximate causes, one covered and the other excluded, the exclusion will take precedence and insurers will be entitled to decline cover.

Following a shift in English insurance law after the introduction of the Insurance Act 2015 which was legislation widely perceived to be "pro-insured", this recent judgment in Navigators v Atlasnavios is a helpful confirmation of the value and importance of exclusions in insurance policies.

Whilst the decision relates to a marine policy, this article explores how the judgment may affect energy insurance losses which are often deemed, in root cause analysis reports, to be caused by a multitude of concurrent causes.

The Facts and Judgment

In August 2007, unknown third parties attempted, unsuccessfully, to smuggle drugs out of Venezuela by attaching them to the hull of the vessel 'B Atlantic'. Venezuelan authorities located the drugs during an inspection and seized and detained the vessel. In June 2008, the owners served a notice of abandonment which was effective to constitute the vessel a constructive total loss.

The policy in question was a named perils wording which included cover for "persons acting maliciously". Ultimately, it was held by the Supreme Court that the act of attaching the drugs to the vessel was not considered a "malicious act", as the smugglers had not intended that the vessel be detained or rendered a constructive total loss.

However, the remainder, and for the purposes of this article, the most interesting section of the judgment dealt with the question of whether, if the court had held there to have been a loss by an insured peril (which it did not), the following exclusion would have applied in respect of for loss arising from: "detainment...by reason of infringement of any customs or regulations." On any view, there had been detainment by reason of infringement of customs or regulations.

Lord Mance gave the leading judgment (which was unanimously agreed) and he considered the scenario where, if both the covered peril and the excluded peril worked concurrently to...

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